Plot line of this recovery: The recession officially ended in June 2009, U.S. measured-media spending turned northward in first-quarter 2010 (according to WPP's Kantar Media), and U.S. advertising and marketing-services firms have added 23,100 jobs since ad industry employment hit bottom in February 2010 (according to Bureau of Labor Statistics data).
The Big Four agency holding companies -- WPP, Omnicom Group, Publicis Groupe, Interpublic Group of Cos. -- in 2010 added 11,000 jobs (including acquisitions) after slashing 22,000 jobs in 2009.
2010 worldwide revenue for world's 15 largest agency companies. Some figures are Ad Age estimates. Some U.S. figures reflect North America. See expanded information on these companies: AdAge.com/agencyfamilytrees2011. Source: Ad Age DataCenter.
Shares in WPP, Omnicom and Interpublic in first-quarter 2011 reached their highest levels since pre-recession 2007, a sign of investors' optimism about the sector. Publicis shares this year reached their highest point since 2000.
U.S. 2010 revenue for marketing-communications agencies -- including advertising, marketing services, media, health care and public relations -- rose 7.7% to $30.4 billion, according to the Ad Age Agency Report, which tracked the performance of more than 900 U.S. agencies. (Ad Age DataCenter adjusted agency revenue figures for acquisitions to show revenue growth on an apples-to-apples basis.)
Every major agency discipline rebounded last year, with U.S. revenue growth in the range of 6% to 7% for most disciplines (including advertising, promotion, health care and public relations). Revenue for digital-specialty agencies (essentially digital pure-play agencies) surged 16.3%.
The U.S. was the world's star performer in 2010 for advertising and marketing services, exceeding expectations and outpacing growth in most other regions.
To be sure, some of the U.S. advertising market's recovery reflected what WPP Chief Executive Martin Sorrell has called a "dead cat bounce": The ad business fell so sharply that it wasn't surprising to see decent percentage gains when the economy began to recover after the longest recession (December 2007 through June 2009) since the Great Depression.
1. Digital-specialty agencies. 2. CRM/direct agencies had $4.75 billion in revenue including $2.00 billion from digital services. Numbers rounded. Source: Ad Age Agency Report 2011.
Remember how bad things were: U.S. ad spending as a percent of gross domestic product in 2009 slumped to its lowest level in decades, and U.S. agencies in 2009 saw the sharpest revenue drop (7.5%) since Ad Age began the Agency Report in 1945.
Ad spending and employment remain well off their peak. Publicis' ZenithOptimedia says U.S. ad/marketing-services spending won't break its 2007 record until 2013. U.S. ad and marketing-services firms employ 76,500 fewer people today than at the industry's pre-recession, late-2007 peak. (See AdAge.com/adjobs.)
But there is no denying the turnabout in ad spending last year as key advertising sectors including automotive rebounded from their Great Recession lows.
Omnicom in 2010 reported 8.7% U.S. organic growth (revenue growth after factoring out acquisitions/divestitures and the impact of foreign exchange), beating its 6.4% worldwide organic growth.
In 2010, Interpublic reported robust 10.1% organic revenue growth in the U.S., and Publicis posted 9.9% organic growth in North America, better in both cases than any other single region except Latin America.
Revenue for the world's 50 largest agency companies totaled $62.2 billion in 2010, up 9.4%. U.S. revenue for those firms jumped 11.4%. (Ad Age DataCenter did not adjust agency company total-revenue figures, so the high growth rates last year in part reflect acquisitions.)
The U.S. accounted for 42% of the top 50 agency firms' worldwide revenue.
With the economy and financial markets back on track, marketing-communications companies have returned to merger-and-acquisition mode, doing a lot of buying -- and some selling.
Omnicom is undertaking a global review of operations with the aim to reorganize or dispose of what President-CEO John Wren has termed "non-core, low-growth, low-margin businesses ... generally in smaller markets." As of April 2011, Omnicom had disposed of units with combined annual revenue of about $120 million.
OUT WITH THE OLD, IN WITH THE NEW
Agency firms over the past year announced numerous fill-in acquisitions but no blockbusters. Among the deals and agency realignments:
WPP (No. 1) in April 2011 agreed to buy Commarco Holding (No. 37), a German agency group controlled since 2003 by a private-equity firm. WPP completed 25 small and midsize acquisitions in 2010, including Canadian agency Taxi; I-Behavior, a U.S. database marketing firm; Marketing Direct Inc., a U.S. marketing-services company; and U.S. digital agencies Blue State Digital and Digitaria. WPP also rolled up four WPP shops into Possible Worldwide, a global digital agency.
Omnicom (No. 2) took majority ownership of Clemenger Group, an Australian agency company in which Omnicom's BBDO Worldwide had been a minority investor since 1972. Omnicom also purchased Communispace, a digital market-research-services firm; bought The Modellers, a market-research company; acquired The Core, a U.K. design and branding agency; bought Sales Power, an in-store promotion company in China; and purchased a majority stake in Maslov PR, a PR agency in Russia. Omnicom disbanded pioneering digital agency Agency.com, splitting its offices among TBWA Worldwide network agencies. Omnicom sold a majority stake in U.S. PR firm Brodeur Partners.
Publicis (No. 3) made two deals in Brazil, buying digital shop AG2 and a 60% stake in agency firm Talent Group. Publicis also acquired PR firms Eastwei Relations (now Eastwei MSL) in China and Interactive Communications Ltd. (now ICL MSL) in Taiwan. Publicis bought U.K. integrated/digital-marketing firms Airlock, Chemistry Communications Group, Holler and Kitcatt Nohr. Publicis this month agreed to sell its 56% stake in U.K. PR firm Freud Communications back to Chairman Matthew Freud.
Interpublic (No. 4) bought U.K. shop Delaney Lund Knox Warren from agency firm Creston, making the renamed DLKW Lowe the U.K. hub of Lowe Worldwide.Interpublic increased its stake in Brooklyn-based digital agency Huge to 75% from 51%. The company did two deals in Brazil, acquiring digital shop Cubocc and merging McCann Erickson's Brazil operation with local agency W/Brasil. Interpublic sold U.S. PR agency MWW Group.
Dentsu Inc. (No. 5) bought U.S. digital ventures Innovation Interactive ( 360i) and Firstborn. The Japanese company set up Dentsu Network West as a New York-based network for its agencies in the Americas and Europe.
Aegis Group (No. 6) bought Mitchell Communication Group, an Australian agency firm.
InVentiv Health (No. 21) was bought by a private-equity group that is expanding the venture through acquisitions.
LBi International (No. 27) merged with a private-equity-backed European search-engine firm, making Amsterdam-based LBi a bigger force in digital.
George P. Johnson, the nation's biggest event-marketing firm, reorganized under a new agency holding company, Project WorldWide (No. 29). Project is on the hunt for deals.
Rosetta (No. 30) bought Level Studios, the fast-growing digital agency's latest acquisition.
Cossette, a Canadian agency company that went private in 2009, took the new name Vision7 International (No. 35) as it looks for more global growth.
GSI Commerce (No. 36), an e-commerce and interactive marketing-services firm, agreed to be acquired by eBay.
ICrossing (No. 44) was acquired by Hearst Corp., which followed Meredith Corp. (No. 39) as a media company making a play in the agency business.
See more ad industry jobs data: AdAge.com/adjobs Source: Bureau of Labor Statistics data.